EUR / USD
The Euro was held in tight ranges ahead of Monday’s New York open with a lack of trading volumes limiting market moves. The dollar held steady and the Euro was again unable to break above the 1.1800 level against the US currency amid expectations over an accommodative ECB monetary policy.
The New York Empire manufacturing index dipped to 18.3 for August from 43.0 the previous month and well below consensus forecasts of 29.0 for the month. There was a sharp slowdown in the new orders index and a substantial dip in shipments, although unfilled orders increased at a slightly faster rate.
There was a reduction in the rate of employment growth, but cost pressures remained high and prices charged increased at a faster pace to a fresh record high. Companies were more optimistic over the outlook and expected price pressures to ease only slightly over the next six months.
The dollar overall was able to post limited net gains after the Wall Street open equities dipped lower and risk appetite remained more fragile. Overall ranges were still narrow with the Euro around 1.1775 as trading volumes remained low.
The latest US retail sales data is due for release on Tuesday and a firm release would help offset the impact of the much weaker than expected consumer confidence data released on Monday while a weak report would tend to reinforce market concerns. The dollar edged higher on Tuesday amid an element of defensive demand amid reservations over coronavirus developments and the Euro edged lower to around 1.1765 amid choppy trading conditions.
US Media reports on Monday indicated that the Japanese government was likely to extend the current coronavirus emergency measures until September 12th and could also extend the measures to additional prefectures which maintained unease over domestic economic trends.
US equities retreated sharply in early trading and Treasuries also posted net gains with the 10-year yield just below 1.25%. The dollar dipped to low at 109.10 before regaining some territory as Wall Street equities pared losses and Treasuries retreated from their best levels. Underlying confidence was still fragile with the dollar held around 109.25 at the European close with the yen resilient on the crosses.
Markets continued to debate potential Federal Reserve policy actions ahead of Chair Powell’s Jackson Hole speech next week. Boston head Rosengren stated that he would back a tapering announcement in September if there was another strong employment report early next month. He added that his preference would be to start reducing bond purchases in October or November. Risk conditions were fragile in Asia on Tuesday with further concerns over regional coronavirus developments. The dollar was held around 109.30 with the Euro around 128.60 as markets continued to monitor overall risk appetite.
Sterling struggled to secure independent direction on Monday, especially with a lack of domestic data and uncertainty ahead of this week’s releases. Risk appetite was more vulnerable during the day which hampered the UK currency to some extent, although overall selling pressure was light.
The UK currency settled close to 1.3850 against the dollar while the Euro continued to test the 0.8500 support area.
Sterling edged lower in early Europe on Tuesday with sentiment eroded by more vulnerable global risk conditions amid low trading volumes.
The latest UK labour-market data recorded a decline in the unemployment rate to 4.7% in the three months to June from 4.8% previously, but there was a smaller than expected decline in the claimant count. Headline average earnings increased 8.8% in the year to June from 7.3% previously, reinforcing expectations of higher earnings trends. The immediate reaction was limited with Sterling around 1.3820 against the firm dollar while the Euro edged higher to 0.8515.
Swiss total sight deposits increased to CHF714.6bn in the latest week from CHF713.2bn previously which suggests that the National bank has been intervening to curb franc gains, although the overall amounts remain limited which did not suggest major determination to weaken the Swiss currency.
The franc secured further gains on Monday as weaker risk conditions underpinned support. The Euro dipped sharply with a slide below the 1.0800 level triggering further selling despite the possibility of National Bank franc sales. The Euro slipped to lows below 1.0740 and near 2021 lows while the dollar retreated to lows at 0.9110.
The franc maintained a firm tone on Tuesday with the dollar around 0.9130.